Revolt of the CEOsA massive expansion of the federal government, supported by big business, is on the way. Conservatives couldn't be less prepared.
By Christopher Hayes

ears from now, historians will argue over the exact moment at which the Great Conservative
Crack-up finally occurred, and they’ll have no shortage of candidates. Was it December
21, 2004, with the appearance of the first poll that showed a majority of Americans
believed the Iraq War to be a mistake? Or September 2, 2005, when President Bush told
Michael Brown he was doing a “heckuva job” while New Orleans drowned? Or a month later,
when Travis County District Attorney Ronnie Earle indicted Tom DeLay?

But I’d take January 22, 2007. On that date, a who’s who
of corporate America—CEOs from such industrial stalwarts
as Alcoa, DuPont, Caterpillar, Pacific Gas and Electric, and
General Electric—joined environmental leaders at a Washington
press conference on global warming. Their surprising
message for the president and Congress: Please, for the love
of God, regulate us.

It’s worth lingering for a moment over just how strange
this was. Back in 1997, when the Clinton administration
signed the Kyoto Protocol, businesses lobbied the Senate
strenuously not to ratify the treaty. And yet here were industry
leaders—some with miserable environmental records
and decades of experience fighting off the long arm of
the law—taking the lead in advocating for a comprehensive,
economy-wide regulatory regime to address global warming.
It’s a little like a thief who’s been running from the cops
suddenly stopping, turning around, thrusting out his wrists,
and saying, “Arrest me.”

These weren’t the only CEOs asking government
to step in and solve a pressing social problem.
Two and a half weeks later, Wal-Mart CEO Lee
Scott joined Andy Stern, the president of the Service
Employees International Union, to announce
his company’s support for some form of universal
health care. When it comes to business’s united
front against regulation, as Leo Hindery, former
CEO of the YES Network and author of the book It
Takes a CEO, puts it, “[These guys are] looking and
saying, ‘Look, if we don’t play this global-warming
thing right, heck with politics, our company’s going
to get hurt. If we don’t reform health care, I
don’t care if I’m a Republican, my company will fail.’ ”

Not everyone’s happy about this shift. A Wall Street Journal
editorial dubbed General Electric CEO Jeff Immelt a “climate
profiteer,” while CNBC analyst Larry Kudlow complained,
“Wal-Mart’s standing shoulder to shoulder with the public service
unions who basically want nationalized health care. Is
Wal-Mart just kind of getting duped into this?”

But other allies of the corporate sector see these moves
less as betrayals or mistakes and more as a turning of the
page. “The country goes through cycles, and I think we are in
a different period now,” Charles Kolb, a pillar of the Beltway
establishment and the president of the Committee for Economic
Development, a Washington-based business advocacy
group, told me. Kolb served in both the Reagan and George
H. W. Bush administrations, and he said that he sees Reagan
and Margaret Thatcher’s downsizing of the regulatory
state as historic achievements. But, he went on, “the issue
is not whether [Franklin D.] Roosevelt was right or wrong,
or whether Reagan was right or wrong. Look, the question I
would ask is, Are there areas that we need to rethink?”

If the nation’s business leaders seem increasingly open to
an expansion of government’s role in dealing with climate
change and health care, they’re not alone. A recent New York
Times poll found 52 percent of Americans rating global warming
as “very serious,” while 63 percent agreed that “[p]rotecting
the environment is so important that requirements and standards
cannot be too high and continuing environmental improvements
must be made regardless of cost.” And according
to an October 2006 USA Today survey, 68 percent of Americans
believe providing health care coverage for everyone is
more important than keeping taxes down. The sentiment extends
more broadly: last year, a Pew poll showed that only 45
percent of Americans now think the government needs to get
smaller, down from 61 percent a decade ago.

If these polls and other political winds are any indication,
then massive change may be coming to Washington in the near
future, most likely starting in January 2009. On energy and
health care—two huge sectors of the American economy—the regulatory power and reach of the federal government is
likely to expand in a way that hasn’t occurred since the 1970s.
Today’s conservatives, desperately embracing the small-government
ideology that once supported their movement,
are almost completely unprepared for this tsunami of federal
growth. Unless they can get business back on their side, or
win back power, they’ll be in a position neither to stop this
development nor to shape it. Indeed, right now they seem
blithely unaware of what’s about to hit them.

he history of the relationship between big business and
the Republican Party isn’t quite as simple as one might
imagine. Not much gets done in American politics without
either the active support or the strategic silence of major
corporations, and while big business has been a remarkably
consistent and aggressive foe of certain staples of progressivism
(anything having to do with unions, for instance) it has
also lent crucial support to some of the most significant expansions
of the regulatory or welfare state. To name just one
example among many, the Social Security Act of 1965, which
reformed Medicare and Medicaid, came about in large part
because of the backing of Blue Cross Blue Shield, who wanted
to unload the high-risk, high-cost elderly onto government.

As recently as the late 1980s and early 1990s, top-drawer
corporations could still be found supporting efforts to
expand Washington’s reach—particularly when those efforts
were designed to solve social problems that affected
their bottom line. For instance, in response to the failure
of the education system to provide properly trained workers,
business threw its weight behind the call from the nation’s
governors, and then president George H. W. Bush, for
greater federal involvement in local schools—support that
CEOs have kept up through subsequent administrations.
And though it’s been somewhat lost to history, big business,
faced with spiraling health care costs, was an early driver
of President Clinton’s reform initiative. When the plan was
unveiled in 1993, the U.S. Chamber of Commerce offered
tentative backing.

That was not to last. Conservatives, led by Newt Gingrich,
Bill Kristol, and the National Federation of Independent
Businesses—an interest group for small and medium-sized
businesses, with a unwaveringly conservative line—recognized
the political threat that universal health care posed.
In a now-famous strategy memo, Kristol warned that Republicans
had to kill, rather than amend, the Clinton proposal.
Its success, he warned, would “re-legitimize middle-class
dependence for ‘security’ on government spending
and regulation,” and “revive ... the Democrats, as the generous
protector of middle-class interests.” Kristol and his
allies succeeded in convincing big business that their long-term
interests couldn’t brook a Democratic resurgence. The
change was decisive. The business community mobilized
against the Clinton plan, spending $17 million on advertising,
and helping to ensure its defeat.

Riding the momentum of that victory, the Gingrich revolution
swept Republicans into power, inaugurating a new
era in which there would be almost no daylight between major
corporations and the GOP. Tom DeLay’s K Street Project
kept corporations inside the tent by threatening to stonewall
their legislative agenda unless they hired lobbyists who
had been preapproved by Republican gatekeepers. Business,
which in the past had dispensed its largesse without much
heed to party, now cast its lot with the side that controlled
nearly every branch of government. During Bush’s first year,
Karl Rove won business support for tax cuts, even though
the White House didn’t insert the breaks and loopholes
for corporations that many in the business community had
sought. (Rove wanted a relatively “clean” bill
to insulate Bush from the criticism that had
bedeviled Reagan’s tax cuts back in 1981, when,
in the words of Reagan budget director David
Stockman, “the hogs were really feeding.”)

While under the DeLay/Rove machine
the GOP has often acted as little more than
an agent for the interests of big business,
the relationship has by no means been unidirectional.
The Republicans also have used
corporations for their own ends. DeLay, perhaps
self-servingly, boasted of the arrangement
this way: “We are ideologues. We have an agenda. We
have a philosophy. I want to repeal the Clean Air Act. No
one came to me and said, ‘Please repeal the Clean Air Act.’
We say to the lobbyists, ‘Help us.’ We know what we want
to do, and we find people to help us do that.”

Of course, DeLay is now under indictment and no longer
in Congress, and the machine he helped construct, a hybrid
of ideological zeal and crass corruption, is quickly breaking down. Democrats now control Congress, and the president’s
approval ratings rival Nixon’s during Watergate. The GOP
machine was always, crucially, a monopoly enterprise, relying
on its stranglehold on Congress and then the White
House to keep its various constituencies in line. This generally
held sway even as Hurricane Katrina and Iraq made the
administration’s incompetence harder and harder to ignore,
and business leaders started shaking their heads behind
closed doors. But with its popularity and power now greatly
diminished, the party is no longer able to keep those splits
private. “The ability of the administration to intimidate the
business community ... seems gone,” said John Podesta, who
heads the Center for American Progress. “They don’t seem
very afraid to incur the wrath of the White House.”

f course, the relentless push of real-world problems
has been even more important than the weakening
of conservative power in prompting this shift. After
a period in the late 1990s during which HMOs helped keep a
check on health care costs, those costs started to rise again
in 2002, and are now hovering around 7 percent above inflation.
In addition, as the world has continued to warm, the
scientific consensus around global warming has hardened.
Of the ten warmest years on record, four have been in the
last decade.

In 2005, Peter Darbee, the CEO of PG&E Corporation, decided
his company would do well to take a hard look at this
reality. PG&E is no Ben & Jerry’s do-gooder company. In fact,
it’s been an archetypal Hollywood bad guy: as the movie Erin
Brockovich dramatized, in 1996 it was found to have contaminated
the drinking water of a southern California town and
was forced to pay $333 million, the largest settlement in a
direct-action lawsuit in U.S. history. Still, Darbee had become
convinced that climate change was a real and growing problem,
and that his company, which provides power for much
of the West Coast, was a major contributor. So he initiated
an internal process to produce a report on climate change
and its effects. The results were unequivocal: “We came to
the conclusion that the earth is warming, mankind is responsible,
and the time to act is now,” he told me. The internal
review also concluded that the best way to address the
problem was some kind of mandatory control and regulation
of carbon emissions.

Last year Darbee emerged as an outspoken proponent of
Governor Arnold Schwarzenegger’s ambitious greenhouse-reduction
strategy, and helped to organize the business-environmental
coalition that put together the January press
conference. When I asked him what initially prompted his
decision to focus PG&E’s attention on climate change, he cited
a basic principle of management: the longer you wait to address a crisis, the less room you have to maneuver. “We
could sit on this and drag our heels and then the consequences
could be drastic. The more time you have to deal with it,
the more degrees of freedom you have.”

Even for those CEOs preoccupied with the next quarter’s
earnings, the long term has a funny way of sneaking up. Imagine
for a moment you’re planning a new factory to produce
washing machines. Ideally, the facility is going to operate
for a number of years into the future, but its operating costs
are going to be quite different if the federal government imposes
a carbon tax at some point in the near future. How
much capital do you invest up front to reduce the facility’s
emissions? Or imagine you’re a major car company debating
whether to site a new car plant in Canada or Alabama. After
weighing the pros and cons, you decide on Canada. Why? Because
in the United States, health care costs are growing at
7 percent above inflation, and you’re likely to be on the hook
for your employees’ health care costs into the foreseeable
future. This, in fact, is exactly what happened in 2005, when
Toyota sent shockwaves through corporate boardrooms by
opting to open a new plant in Woodstock, Ontario, citing
Canada’s socialized medicine as a factor.

If the Toyota decision was a wake-up call on health care,
Hurricane Katrina played a similar role on climate change.
“I think it moved the frame of reference,” said Mindy Lubber,
who leads a group of institutional investors working
to pressure businesses to reduce emissions. Even for those
CEOs who’d believed that climate change was a problem,
Lubber said, most had conceived of it as a long-term issue.
“And as a CEO, I’m programmed to think about quarterly
earnings. But what we saw with Katrina was that quarterly
earnings are impacted,” since the destruction of the Gulf
refineries caused a spike in energy prices, among other
negative effects.

Health care and climate change are, of course, distinct
issues, each with their own associated policy debates—single-payer or individual mandates, carbon taxes or cap
and trade—but what unites them is the unpredictability of
the future costs they’ll impose on business. “The one thing
that business managers and CEOs hate is uncertainty,” said
Bruce Josten, a top lobbyist at the U.S. Chamber
of Commerce. “They love certainty. Here
you have two issues of huge uncertainty and
huge unpredictability.”

But certainty requires clear rules, and
those have been lacking at the national level.
In the absence of federal leadership, state
governments have rushed in to fill the vacuum,
passing rafts of legislation meant to encourage
alternative energy use, curb carbon
emissions, and provide health insurance for
their citizens. The initiatives on both these
fronts—from Massachussets Governor Mitt
Romney’s universal health care reform to
New York Mayor Mike Bloomberg’s recently
unveiled congestion pricing—have triggered
fears among corporations that they’ll
have to deal with a state-by-state patchwork
of fifty different regulatory regimes, giving
them a powerful incentive to support a comprehensive
nationwide approach.

Whatever public-mindedness there was
to Darbee’s decision to take a lead on carbon regulation,
his calculation of the likelihood of future regulation had
more than a little to do with his conversion. “It’s not clear
whether we will get legislation in this administration,” he
said. “But I think in the next three years, the probability
approaches 100 percent.” The more convinced corporations
become that regulation is going to happen, the more invested
they become in shaping that regulation. In this way,
the anticipation of future regulation creates something of
a self-fulfilling prophecy. “The underlying statement I’ve
heard is that if this [health care] system collapses then the
business community will end up with something they don’t
like,” Andy Stern told me. “There’s sort of a sense [that]
we should lead this, or if we don’t, whatever happens we
should accept the consequences.”

“The corporate guys are beginning to think this is going
to happen,” said Bill Galston, a senior policy adviser in the
Clinton White House and a current fellow at the Brookings
Institution, referring to health care and climate change legislation.
“They are willing to make their peace with the welfare
and regulatory state as long as they can have some say.
What they don’t want is for the train to leave the station and they’re not in the first-class car.” The Chamber of Commerce’s
Josten summed up his members’ views this way:
“You want a seat at the table, because if you’re not at the table
you may be on the menu.”

hough in the imagination of the left, big business
and conservatives are natural allies, from the point
of view of many on the right that’s hardly the case. “I
see most of the corporate types as the enemy,” conservative
direct-mail guru Richard Viguerie told me, speaking of big
business’s newfound support for action on global warming
and health care. “I don’t see them as our allies, never have.
They’re country-club Republicans. They really don’t like us,
quite frankly, and it’s probably mutual. Can you imagine Jeff
Immelt standing up and defending any social issue he feels
strongly about, or talking about the vulgar culture we have?
They’re very unprincipled with these things. They’re recovering
big-government types. You give them a temptation, and
they jump at it.”

In that sense, the partnership that congressional leaders
forged with big business in 1993 has always been unstable.
And the recent defections of some CEOs have sparked
vituperation from movement loyalists. “I’ve been hearing
that the Fortune 500 types would love to drop their legacy
costs off at the federal taxpayer,” conservative power broker
Grover Norquist lamented to me. “The Safeway guy”—CEO
Steve Burd, who recently endorsed Democratic Senator Ron
Wyden’s universal health care legislation—“has signed off on
pensions because he’s a lousy businessman. He screwed up,
and he wants the rest of us to pay for his lousy incompetence.
Wrong answer!”

Norquist and his allies understand that their only hope
is to remake that 1993 deal. But short of the GOP retaking
Congress and holding on to the White House—or the earth
suddenly cooling—that’s not going to happen. And at some
level, conservatives know it, responding to questions about
the rift with blustery denial: “There are 27 million companies
in America,” said Norquist. “I’m surprised at how few collaborators
the Democrats can come up with. The Germans had
better luck.”

Republicans, weighed down by the knee-jerk small-government
philosophy that their base demands, simply
lack the ideological flexibility to even talk about issues, like
global warming and health care, that will require an expansion
of government—much less propose ideas to help
shape them. Just look at the presidential field: John McCain has retained the lone plank of his maverick platform
by sponsoring legislation in the Senate to cap and trade
carbon emissions, but he’s not spending much time touting
that effort in front of Republican primary voters. Rudy
Giuliani, who as mayor of New York was moderately fiscally
conservative but certainly no supply-sider, is now waxing
poetic about the benefits of the flat tax, the beauty of
the Laffer curve, and the creeping “socialism” of the Democratic
Party’s universal health care proposals. And Mitt
Romney finds that his signature accomplishment as governor
of Massachusetts—a universal health care law that
relies heavily on “individual mandates”—makes him suspect
in conservative eyes. “He’s spinning his wheels at 100
miles an hour to explain how it wasn’t a big-government
solution but a market solution,” former GOP Congressman
Dick Armey told me.

So Republican presidential candidates are caught in a
bind: between, on the one hand, what the public increasingly
wants and the business class increasingly sees as necessary,
and, on the other, what the party’s ideological enforcers demand.
Some conservatives aren’t too blinkered to see where
this is likely to lead. From his perch on the New York Times
op-ed page, David Brooks has been urging fellow conservatives
to stop looking to the idealized small-government icons
of Goldwater and Reagan as a guide to the problems of the
twenty-first century. “Democratic approaches are favored on
almost all domestic, tax, and fiscal issues, and even on foreign
affairs,” Brooks wrote in an April column entitled “Grim
Old Party.” “The public, in short, wants change. And yet the
Republicans refuse to offer that.”

At the end of the day, the country can’t tax-cut its way to
better health care or a post-oil economy or fewer carbon dioxide
emissions. The titans of capitalism are beginning to realize
that, even if the conservative movement’s leading lights
can’t—or won’t.

- - Advertisers - -

Christopher Hayes is a Puffin Foundation Writing Fellow at the Nation Institute.